Investigators with the Department of Housing and Urban Development recently entered into settlements with various lenders who they alleged allowed borrowers to obtain multiple reverse mortgages on more than one property.
Auditing HUD’s oversight of its Home Equity Conversion Mortgage (HECM) program, the Office of the Inspector General found that 33 borrowers had more than one reverse mortgage under the program.
A single individual carrying multiple reverse mortgages violates HUD HECM program requirements, because they require a borrower to reside in the mortgaged residence as his or her principal residence. Additionally, borrowers may not have more than one principal residence at a time under the HECM program.
In one circumstance, Bank of America, NA, and its underwriter were not duly diligent in underwriting the reverse mortgage for one borrower who obtained two HECM loans on properties she owned in Massachusetts and Florida, according to OIG allegations.
To resolve the matter, HUD accepted a settlement agreement from the lender—which did not constitute an admission of liability or fault by any of the parties involved.
The loan balance was $206,480 when the Office of General Counsel completed its action.
Another settlement included lender James B. Nutter & Co. and its underwriter, which OIG also alleged were not duly diligent in their underwriting efforts.
In this scenario, one borrower allegedly obtained HECM loans on two properties he owned in Philadelphia.
James B. Nutter & Co. agreed to indemnify the loan and pay a penalty in the amount of $7,500. By the time the Office of the General Counsel had completed its action, the loan balance from the reverse mortgages was $72,166.
The settlement of $7,500 was placed in HUD’s Audit Resolution and Corrective Actions Tracking System as funds put “to better use.”
Written by Jason Oliva